Executive Insight – Value over quality

Fear and panic drove the markets through most of August causing more than $4 trillion in wealth destruction, while policymakers responded with “soft patches” and short-term solutions to what are structural and fundamental sovereign-debt problems on either side of the Atlantic. During the week of August 8 the S&P500 — best single gauge of the United States equities market — went on a roller coaster ride, closing consecutively at -6.7 percent, +4.7 percent, -4.4 percent, +4.6percent, and +0.5 percent. While choppy and erratic, both American and European equity markets began a four-week downward near the end of July, with the heightened risk of a recession prompting investors to dump risky assets and seek safety in the Swissie (CHF), gold and in long-dated US Treasuries, in other words, there has been a general flight-to-quality. Thus, the concern today is how to trade equity and foreign exchange markets, and hedge against potential